The United States core Consumer Price Index (CPI), seasonally adjusted, rose to 335.423 in April. It was 334.165 in the previous reading.
This shows an increase of 1.258 index points from the prior month. The data refers to the core CPI measure, which excludes food and energy prices.
Core Inflation Remains Elevated
The latest Core CPI data shows inflation is not cooling down as hoped, coming in at a monthly increase of roughly 0.4%. This figure is above the 0.3% consensus expectation, signaling that underlying price pressures remain strong. For us, this means the Federal Reserve will likely delay any planned interest rate cuts.
We should adjust interest rate derivative positions to reflect a more hawkish Fed. The market is now rapidly repricing rate cut expectations, with the probability of a September cut dropping from over 60% to below 30% according to Fed funds futures. This suggests opportunities in selling Eurodollar or SOFR futures contracts that had priced in more aggressive easing later this year.
In equity markets, this persistent inflation is a headwind, particularly for growth and tech stocks sensitive to higher borrowing costs. We can expect increased market volatility, as the Cboe Volatility Index (VIX) has already surged over 15% to above 17. Protective strategies, such as buying puts on the Nasdaq 100 ETF (QQQ) or S&P 500 SPDR (SPY), are now more prudent.
This data reinforces the case for a stronger U.S. dollar, as rate differentials widen against other major economies. The U.S. Dollar Index (DXY) has already broken out to a six-month high, reflecting this monetary policy divergence. We should consider long positions in the dollar against currencies like the euro or yen, using futures or options to capitalize on the trend.
Lessons From Prior Inflation Surprises
This situation feels very similar to what we experienced in the spring of 2025 when a few stubborn inflation reports postponed the Fed’s pivot. That period saw a notable market correction in the following weeks as traders unwound their dovish bets. The key takeaway from that time was that fighting the Fed’s hawkish reaction was a losing trade.
